Air Tanzania

Chinese firm leased obsolete aircraft for Air Tanzania (East African)

China Sonangol International Holdings Ltd, the Chinese government investment firm, has been plunged into fresh controversy following revelation that it procured obsolete aircraft for the Tanzanian flag carrier.

One of the three aircraft purchased by China Sonangol, a Dash 8 300 series operated by Air Tanzania Corporation Ltd (ATCL) crashed in April at Kigoma Airport in western Tanzania, injuring 35 passengers and four crew members. The aircraft is now a write-off.

A detailed report by the Controller and Auditor seen by The EastAfrican last week says that China Sonangol, as the lead investor in ATCL with a 49 per cent stake, in 2007 leased two secondhand aircraft contrary to a memorandum of understanding entered with the government of Tanzania that same year, after the breakup of the partnership with South African Airways in September 2006.

The planes were a Bombardier Dash 8-Q300 and an Airbus A320-214 that was all of 10 years old. In January 2009, the Airbus A320 underwent a Check D, also known as a Heavy Maintenance Visit, which is done after every four to five years.

Subsequently in July 2010, the aircraft was returned to the lessor, a Lebanese firm, Wallis Trading Company. The government on paper incurred a loss of $39 million on the lease of the Airbus, which according to the report did not fly. But the report further shows that the debt accumulated from the transactions with the Lebanese firm rose to Tsh322 billion ($200 million), enough to purchase three brand new Airbuses of the same series. According to Airbus Aircraft 2012 Average List prices, the purchase order price of a brand new Airbus A320 series is $88.3 million.

Controller and Auditor General Ludovick Utouh says that the government involvement in business decision making at ATCL is a serious problem.

Mr Utouh says that the parties involved in the acquisition of two Dash 8-400 series aircraft that are currently being operated by ATCL were the government and China Sonangol, and the airline’s board of directors and management were not part of the negotiations.

“They were only informed of the decision to procure the two aircraft and asked to advance $500,000 as commitment,” he says. Mr Utouh recommends that the government officials who participated in the controversial Airbus A320-214 leasing deal be taken to court for forcing cash-strapped Air Tanzania to sign a dubious deal with the Lebanese company.

“The most serious organisational flaws were absorbed at ATCL. In the first place, ATCL, exists as a private company vide section three of its Articles of Association,” he writes, adding that its governance, organisational structure and business processes are therefore to be viewed from a private company perspective rather than that of a public company.

The CAG’s report also notes that ATCL has for the past year been operating without a board of directors to oversee its activities. When the previous board of directors’ tenure expired in March 2010, another board was not constituted until August 2010, when the government extended the tenure of the old board to March 31, 2011. “Therefore, since April 2011 to the date of this report, ATCL has had no board of directors in place,” said the report.

“The government should take appropriate action to restructure ATCL by providing it with adequate working capital,” says Mr Utouh.